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Income tax payment and journal entry ?

Vaibhav Jandey (Life iz Hard; I'm Harder) (1175 Points)

24 August 2012

Dear Friends,

Today I just stuck up thinking how the entries for Income tax payment are passed in Companies, Partnership Firms etc.

I would like to know the whole solution to this Income tax entry i.e. all the aspects eg TDS, Advance tax and Provision for Income Tax.

Have different angles towards it.

Please share your knowledge whatever you feel right in your views.

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22 Replies

Nitesh Matta (Nothing) (198 Points)
Replied 24 August 2012

i also want this to be known. Anyone can help?

(Guest)

for Co. prov on income tax is made where as in case of firm n indl files tef'ed to capital a/c (generally)

2 Like

Sravanthi (CA Final ICWA Final & M.B.A) (737 Points)
Replied 24 August 2012

For Advance Tax:

Advance Tax a/c Dr

to Bank a/c

Advance Tax - Asset

For TDS:

TDS a/c Dr

to party a/c

TDS Asset

3 Like

Sravanthi (CA Final ICWA Final & M.B.A) (737 Points)
Replied 24 August 2012

for Tax Provision

P & L a/c Dr

to Provision for Tax a/c

Provision for Tax is a Current Liability & Provisions

for Payment of Tax:

Provision for Tax a/c Dr

to Bank a/c

3 Like

Sravanthi (CA Final ICWA Final & M.B.A) (737 Points)
Replied 24 August 2012

for Finalisaion

1,Tax a/c Dr

to Advance Tax a/c

to TDS a/c

Tax is to booked as an Expenditure

2, P & L a/c Dr

to Tax a/c

Finally Advance Tax & TDs to be Nil. for Checking Purpose

4 Like

harish .k (STUDING) (306 Points)
Replied 24 August 2012

the above entries are correct

Vineet (Assistant Manager) (140 Points)
Replied 24 August 2012

if there is a difference between provision and actual tax paid in that case reversal entry is require(if provision exceed tax)..and if tax part exceed provision in that case nothing needs to be done..please correct if I am wrong..as I am not very sure about it..

R M SHAH (CA) (43 Points)
Replied 25 August 2012

Entries shown by Sravanthi are absolutely correct and Vinnet in case where tax exceeds provision entry for short fall of tax of P.Y. is required to be pass in succedding year.

Ramanuj (Accountant.) (834 Points)
Replied 25 August 2012

the above entry is correct.

Bhaskar Unnikrishnan CPA CMA (Accounts / Administration) (414 Points)
Replied 26 August 2012

Good Explanation Sravanthi...

Rajesh (CA Final Student) (52 Points)
Replied 27 August 2012

Hi,Vineet

If Tax provision exceeds to Tax paid(Adv tax, TDS) you need to pay in that year by Debiting Tax A/c Crediting Bank/Cash A/c.

If Tax provision is less than Tax paid(Adv.tax,TDS) you have to claim for refund.

Vaibhav Jandey (Life iz Hard; I'm Harder) (1175 Points)
Replied 27 August 2012

Originally posted by : Sravanthi
	For Advance Tax: Advance Tax a/c Dr to Bank a/c Advance Tax - Asset For TDS: TDS a/c Dr to party a/c TDS Asset

thank you my friend for replying,

Like the above explanation could you please tell me the cases where i t provision exceeds tax paid and vice versa. What are the adj that needs to be carried out. Please show entry wise if possible; would be great if you can cite the principles applied.